WHAT CONSTITUTES A RETRENCHMENT?
An employee is said to be retrenched when his or her job becomes redundant
and the employer either cannot offer the employee an alternative position or,
any alternative position offered by the employer cannot be accepted by the
An employee is often referred to as “redundant” but a more accurate
description is that the job the employee was employed to perform has become
redundant. That is, the job has become redundant, not the employee. “Retrenchment”
is the expression to describe what happens to an employee whose employment is
terminated by reason of their job becoming redundant.
Retrenchment has been defined by a Court as being a termination of employment
that is “not on account of any personal act of the employee dismissed or any
consideration peculiar to him, but because the employer no longer wishes the job
the employee has been doing to be done by anyone”.
The following circumstances can amount to a redundancy:
- where the employer has introduced new technology resulting in the employee no
longer being needed to work in his/her job;
- the employer restructures the organization and the job is no longer needed to
be done by the employee;
- the employer by reason of financial necessity, has to reduce the size of it’s
- the employer dismisses a worker and re-distributes their work to those who
- the employer, being a company, has failed and receivers have been appointed.
Redundancy and unfair dismissal laws interact in such a way that a retrenched
worker can make a claim for unfair dismissal. The Courts will take the view that
provided the employer has acted in good faith then the employer’s needs must
be respected. However, a claim can be made that the dismissal by way of
redundancy is harsh, unjust or unreasonable on the grounds that:
- The worker was unfairly selected for redundancy;
- The worker was selected for redundancy because of work performance without
having been given the opportunity to respond to the employer’s concerns about
his ability or performance;
- The worker was not properly consulted before the decision to retrench was
- In some cases non-award employees can attack the adequacy of the redundancy
payments made to them.
ARE YOU ENTITLED TO RETRENCHMENT PAYMENTS?
To establish what your entitlements are in a redundancy situation you must
ask the following questions:
Are you the subject of an award (Federal or State) or other industrial
instrument (certified agreements, certified agreements etc)?
Then the terms of the award or instrument relating to redundancy will apply.
If there are no industrial instruments or awards applicable to your
employment, do you have a written agreement/contract of employment with your
If there is a contract/agreement and there is provision for redundancy
conditions then the agreement will apply.
If there is no written agreement or award or other industrial instrument, is
there a company policy document or manual which can be implied into your
contract of employment.
It may be argued that the provisions of the policy or manual apply to the
terms of your redundancy.
If there is no written agreement, award or other industrial instrument, or
other document such as a written policy or manual, is there a custom or practice
within the company which might apply redundancy provisions in your particular
If you have difficulty answering these questions or understanding whether you
are entitled to redundancy payments you should consult a lawyer or your union
THE LAW RELATING TO RETRENCHMENT
The sources of law governing redundancy are:
- Award and agreement clauses
- Statutory provisions protecting workers whose employment is terminated for
technological, structural or economic reasons.
Where 15 or more employees are proposed to be terminated by an employer the
employer must notify the Commonwealth Employment Service of the proposed
termination for reasons of an economic, technological, structural or similar
nature. (Section 170CL of the Work Place Relations Act 1996 (Commonwealth
Legislation) and Part 4 of the Industrial Relations Act 1999 (Queensland).
The Australian Industrial Relations Commission also handed down the
Termination, Change and Redundancy case, Supplementary Decision (1984) 9 IR 115
which is known as the TCR case, supplementary decision. This decision is in
similar terms to the Queensland declared Policy guidelines which are discussed
THE POSITION IN QUEENSLAND
A decision was handed down in the Industrial Conciliation and Arbitration
Commission of Queensland, No. B735 of 1984 which declared Policy guidelines
applicable to termination of employment, and redundancy.
This Policy established standards which could be adopted in particular awards
or other industrial instruments.
The Policy is not binding in circumstances where there is no applicable award
or agreement but is often used as a guide by employers to make redundancy
payments to employees.
The relevant provisions are summarised as follows:
Clause C – Redundancy
Where an employer has made a definite decision that he/she no longer wishes
the job the employee has been doing to be done by anyone and that decision may
lead to termination of employment then the employer must hold discussions with
the employees directly affected, and where relevant with their Union or Unions.
Those discussions must take place as soon as possible after the decision is made
and must cover the reasons for the proposed terminations, measures to avoid or
minimise the terminations and measures to mitigate the adverse effects on the
Where an employee is transferred to lower paid duties the employee is
entitled to the same period of notice as if his/her employment had been
terminated or the employer may elect to make payment of the difference between
the former ordinary time rate of pay and the new lower ordinary times rate of
pay in lieu of notice.
Where a business is “transmitted” (which includes sold, transferred,
assigned) to another employer then the continuity of the employment of the
employee is deemed not to be broken by the “transmission” to the new
employer. This has the effect of the continuation of long service leave and
other entitlements as if the period of employment was continued.
An employee is entitled to at least one day’s time off without loss of pay
during each week of notice for the purposes of seeking other employment.
The employee is entitled to a prescribed period of notice or payment in lieu
of notice together with prescribed severance pay as follows:
Period of Service
Period of Notice
1 year or less
1 year and up to 3 years 2 weeks
3 years and up to 5 years 3 weeks
5 years and over
Where an employee is over 45 years (and has not less than 2 years continuous
service) 1 additional week.
Severance Pay (applicable to redundancy)
Period of Service
1 year or less
1 year up to completed 2 years 4 weeks pay
2 years up to completed 3 years 6 weeks pay
3 years up to completed 4 years 7 weeks pay
4 years and over
8 weeks pay
A weeks pay means the ordinary time rate of the employee. The severance
payment cannot exceed the amount the employee would have received if the
employment proceeded to the employees normal retirement date.
The above severance provisions do not apply to employees who have their
employment terminated for misconduct or employees engaged for a specific period
of time or for a specified task, or to casual, seasonal employees or employees
engaged by the hour or day.
INDUSTRIAL RELATIONS ACT 1999 (QLD)
Section 84(1) of the Act mirrors the minimum period of notice requirements
set out above.
The Act also provides in Part 4 Section 86 to 90 that where 15 or more
employees are to be retrenched the Commonwealth department responsible for
helping unemployed people find work and the union/s of the employees must be
notified as soon as practicable after making the decision.
The notice given must state the number and categories of employees being
dismissed, the reasons for the dismissals and the time or period of time over
which the employer intends to carry out the dismissals.
Section 88 (3) of the Act empowers the Qld Industrial Relations Commission to
- to reinstate the employee/s to their former position or if that is not
possible another position. Further orders may be made to compensate the employee
for remuneration lost;
- that the employer pay each employee a sum equal to 135 penalty units (each
penalty unit representing $75.00)
- declaring the dismissal ineffective until the employer has given the notice.
An application under Part 4 of the Act must be made within 21 days of the
dismissal taking effect or within such further time as the Commission may allow.
This Information Outline is provided courtesy of Hall Payne Lawyers who are
experienced in this area of law. They are located at Level 9, 344 Queen Street,
Brisbane, QLD 4000 or call them on (07) 3221-2044 if you would like more
information on this legal topic, or you wish to obtain formal advice regarding
Hall Payne Lawyers are an established Queensland firm practicing in the areas
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